Incentives Everywhere™

Getting & Keeping Workforce Engagement

Lest we forget, it’s your workforce that actually does the work to execute strategies to fulfill your goals and objectives. And, if your workforce isn’t “bought in”, or engaged, in your goals, objectives, strategies, and action plans, those simply won’t be achieved.

Getting, and keeping, workforce engagement is critical to success. It depends on the performance management equivalent of financial “materiality”: Relevance. For your goals and strategies to be successfully accomplished, they need to be aligned, relevant, and meaningful to the nature of the workforce, and their enabling processes and technologies.

Consistent priorities are a vital element of relevance and engagement. Most organizations fail not because of absent priorities, but because of too many contradictory priorities and their competing resources and processes. People start out working hard to succeed, but when they discover they’re working at competing or net-zero cross-purposes with co-workers, they disengage and perform at the minimum, not the optimum.

Timely, accurate, and precise performance information feedback reporting is another essential ingredient. You will be amazed at how much performance results can be improved simply by providing your workforce with time-relevant role-precise performance results. People want to succeed. You just need to clearly tell them what that actually means.

Finally, since performance incentive and recognition programs are the organization’s most explicit expression of “how to succeed here”, creating and implementing role-precise and time-relevant variable compensation plans, whether non-cash, cash or equity, is a key best-practice for getting, and maintaining, the attention of the people who perform for you.

Lifecycle-Driven Workforce Incentives

When it comes to paying incentives/commissions/bonuses, we’ve seen success with the general rule “reward individuals for events, reward teams for processes”. But, there’s more precision needed to make incentive compensation plans produce the optimal strategy-aligned results.

Often, formal “Sales Teams” are functionally really “Service, or Relationship Teams”, where selling is but one (major, of course) aspect of the overall service expectations of customers. In these cases, that means that “point in time” metrics/incentives have more relevance than typical “period of time” metrics/incentives: portfolio/relationship valuations vs. sales production volumes. Using the wrong metrics and incentives, as they relate to both customer and workforce expectations, and to market/competitive conditions, will not yield desired strategic outcomes.

In some industries, straight sales/selling approaches create a disruptive, even toxic, set of outcomes related to “customer churning” and disproportionate costs of new customer acquisition vs. existing customer retention: where it is relatively less profitable to find and get a new customer than it is to keep and expand an existing relationship. In other industries, sales quality is as important as sales volume, if not more so. Obviously, pure sales production-based incentive compensation would be counter-productive in these environments.

From our vantage point, incentive/bonus/commission compensation plans need to reflect not just overall enterprise strategic objectives, but also local-market/channel Customer, Product and Employee Lifecycles; including full consideration of cross-dimension Customer, Employee, Market/Competitive Profiles. Imagine mapping this on a three-dimensional cube with these elements as your axis points: the intersections within the cube represent each of your various local-market incentive compensation strategies.

A single enterprise, with multiple business units distributed across a diverse set of local-market Customer/ Employee/Market Profiles, each at additionally diverse points in Customer/Product/Employee Lifecycles, simply cannot succeed with a single, standardized incentive compensation plan.

Workforce incentive compensation plans need to be specifically relevant to local multi-dimensional performance management conditions, or they won’t optimize performance and results of Key Customers and Top-Performing Workforce members, and they won’t help you successfully execute your strategy.

ROI: Return On Incentives

Conventional wisdom says that business unit performance incentive plans should include all unit workforce members, regardless of their longevity or experience. This “all-inclusiveness” seems to make sense. Experience is often teaching otherwise.

The reality, particularly in businesses with high-velocity Workforce Turnover, is that upwards of 40% of variable compensation budgets are being wasted on participants who are not, and won’t be, making a material contribution to overall organization performance improvement.

This waste is often the underlying cause of the overall underperformance of otherwise well-designed incentive plans. Executives frequently ask “How can this incentive not be working better?”, or “Why isn’t my incentive plan working?” The answer is often that the distribution of rewards disfavors the true performing “engines of the enterprise”.

Changing the rules and frameworks of incentive plan participation can dramatically improve the effectiveness and ROI of these incentive compensation programs. Structure an overall recognition/incentive plan that motivates new workforce members to perform consistently at certain levels of success over their early months of employment, to then vest in the organization’s non-cash recognition program; then perform consistently at higher levels of success over the next three to six months of employment, to then vest in the organization’s cash incentive program. Longer term success can earn participation in equity-based performance incentive plans.

This performance achievement-based, step-by-step vesting approach, reallocates cash incentives from short-term, marginally contributing workforce members (at the “front-end” of their frequently brief tenure) to those who have shown sustained performance improvements over a longer-term and earned their way into greater rewards.

How much happier would your top performers be if you improved the pay-out potential of your incentive plan by 25% to 50% because you weren’t wasting money on short-term and underperforming participants (and this reallocation doesn’t cost you any additional funds)?

StrategixEPM™ fully automates this optimally-effective multi-dimensional Incentive Lifecycle methodology, providing you with maximum Return on Investment on your performance incentive compensation budgets.

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